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CEO says N.Y. win puts DraftKings back on growth path

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DraftKings chief executive Jason Robins left the door open to a merger with rival FanDuel.
DraftKings chief executive Jason Robins left the door open to a merger with rival FanDuel.Barry Chin

DraftKings Inc. chief executive Jason Robins hailed the early-morning passage of a bill Saturday that would legalize and regulate daily fantasy sports contests in New York, saying he expects it will speed similar efforts in other states and propel growth at the Boston-based startup.

And, in an interview with the Globe Saturday, he offered perhaps his most supportive comments to date on a possible merger between DraftKings and its bigger rival, FanDuel Inc. of New York.

"It's an interesting idea that I'm very open to… It's pretty clearly something that has potential to add shareholder value," Robins said, acknowledging that the two largest daily fantasy sports companies have held fleeting merger talks in the past. "It's always possible that those conversations could become more accelerated and lead to things."

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However, he cautioned, "I wouldn't characterize it as something that's very active or serious at this point."

On Monday, Bloomberg News and Reuters reported that the companies were holding talks as investors urge a tie-up between the firms, which have faced the same regulatory scrutiny in the United States. The companies have also engaged in a costly advertising war, combining to spend over $200 million on TV spots last year.

DraftKings' investors include 21st Century Fox Inc., Boston fund manager Wellington Management, Robert Kraft's Kraft Group, Major League Baseball, and the National Hockey League. Among FanDuel's backers are Piton Capital, Comcast Ventures, and KKR & Co.

Some investors have slashed their estimates of DraftKings' value following accusations by New York Attorney General Eric Schneiderman and other officials that the company's games are a form of illegal gambling.

Schneiderman on Saturday said he would "enforce and defend" the new fantasy law, but still pursue his claims against DraftKings and FanDuel for misleading advertising and consumer fraud.

Robins called the New York bill a major victory that could ultimately put DraftKings "back on the path to hyper-growth," a reference to last year's huge increase in the popularity of fantasy games.

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Fantasy sports contestants compile mythical rosters of actual athletes, amassing points based on those players' actual statistics. In daily fantasy sports, the variety popularized by DraftKings and FanDuel, those contests can span just one day or one week's worth of real-life games.

That short turnaround dramatically increases the number of games that can be played.

Robins said DraftKings expects to resume accepting entries from New York, the country's second-largest fantasy market after California, in time for the start of the all-important National Football League season in September.

First, though, the measure must be signed by Governor Andrew Cuomo. Then, DraftKings will need to obtain a temporary operating permit from state regulators. Cuomo's office worked with state lawmakers to refine aspects of the bill, but the governor has carefully avoided promising to sign it.

Robins described staying awake into early Saturday morning to watch the state Senate vote on the bill, which would tighten oversight of fantasy games, tax their proceeds, and establish consumer protections while clarifying that they are not considered illegal gambling under state law.

"I was exhausted by that point," Robins said. "I sent a tweet, kissed my wife, and passed out."

Robins downplayed any impact the measure's 15 percent fantasy-operator tax would have on DraftKings' bottom line, saying the company could still turn a profit there.

The states that have passed fantasy laws, including New York, "have done a good job striking the right balance between consumer protections… but also setting up the industry for continued success and growth," he said. "There are lot of industries that are taxed and it doesn't necessarily affect things."

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Robins said that other states have been watching to see how New York resolves its daily fantasy controversy. Now that the bill has passed New York's legislature, he hopes the process of winning explicit permission to operate in other states will move more quickly.

"It's a tremendous accelerator," he said. "Other states, I think, are going to act sooner now."


Dan Adams can be reached at dadams@globe.com. Follow him on Twitter @DanielAdams86.